The Effect of Business Climate on Operations of Small and Medium Scale Enterprises in Nigeria

Authors

  • Joseph Oluremi Olubitan Ladoke Akintola University of Technology Ogbomoso, Nigeria

DOI:

https://doi.org/10.21512/bbr.v8i3.3715

Keywords:

business climate, enterprises operator, Small and Medium Scale (SMEs), Nigeria

Abstract

This research investigated the effect of business climate on operations of Small and Medium Scale Enterprises (SMEs) in Nigeria. Specifically, the aims were to identify the various business climates affecting SMEs, examine how business climates affects sales turnover of SMEs, and evaluate the effect of business climate on Total Factor Productivity (TFP) of SMEs in Nigeria. The research utilized secondary data collected from 2.783 registered businesses in all sectors. The data collected were analyzed using descriptive statistics such as mean and standard deviation. It reveals that majority of SMEs experience one constraints or another as a major obstacle which includes inadequate electricity supply (53,22%) and access to finance (15,74%). Inferential statistics such as Stochastic Frontier Analysis (SFA) indicated that labour (0,9943; P < 0,05) and infrastructure (0,7133; P < 0,05) are the only significant variables to sales turnover. Meanwhile,  the regression analysis shows that raw material, labor, infrastructure and fixed cost are the variables that have a strong predicted variance in TFP at P < 0,05 with p-value of 0,000. Water is also observed to be significant at P < 0,1 with p-value of 0,087.

Author Biography

Joseph Oluremi Olubitan, Ladoke Akintola University of Technology Ogbomoso, Nigeria

Management and Accounting Department

References

Abbey F., (2015). International business. Retrieved May 15th, 2015 from www.mbaknol.com/international-business

Arimah, B. C. (2001). Nature and determinants of the linkages between informal and formal sector enterprises in Nigeria. African Development Review, 13(1), 114-144.

Arinaitwe, S. K. (2006). Factors constraining the growth and survival of small scale businesses. A developing countries analysis. Journal of American Academy of Business, Cambridge, 8(2), 167-178.

Bah, E. H., & Fang, L. (2015). Impact of the business environment on output and productivity in Africa. Journal of Development Economics, 114, 159-171.

Batra, G., & Stone, A. (2004). Investment climate, capabilities and firm performance: Evidence from the world business environment surveys.Washington, D. C.: Investment Climate Department, World Bank.

Belotti, F., Daidone, S., Ilardi, G., & Atella, V. (2012). Stochastic frontier analysis using Stata. The Stata Journal, 13(4), 719-758.

Collier, P., & Gunning, J. W. (1999). Explaining African economic performance. Journal of economic literature, 37(1), 64-111.

Dethier, J. J., Hirn, M., & Straub, S. (2010). Explaining enterprise performance in developing countries with business climate survey data. The World Bank Research Observer, 26(2), 258-309.

Dionco-Adetayo, E. A., & Adetayo, J. O. (2003). Business environment analysis: Globalization era imperative for small scale industries. Journal of Social Science, 7(5), 283-292.

Eeden, S., Viviers, S., & Venter, D. (2004). An exploratory study of selected problems encountered by small businesses in a South African context. Journal of African Business, 5(1), 45-72

Focus Economics. (2016). The state of Nigeria economy. Retrieved from www.focus-economics.com/countries/nigeria

Goldratt, E. M., & Cox, J. (1984). The goal: Excellence in manufacturing. New York: North River Press.

Harris, M. L., & Gibson, S. G. (2006). Determining the common problems of early growth small businesses in Eastern North Carolina. SAM Advanced Management Journal, 71(2), 39-45.

Ishengoma, E. (2004). The role of firm-resources: Performance differentials between women-and men-owned micro-enterprises in Tanzania, Leipzig: University of Leipzig.

Ishengoma, E. K. (2005). Firm’s resources as determinants of manufacturing efficiency in Tanzania: Managerial and econometric approach (Vol. 8). LIT Verlag Münster

Ishengoma, E. K., & Kappel, R. (2008). Business constraints and growth potential of micro and small manufacturing enterprises in Uganda. GIGA Journal of Research Programme, 5(78), 1-29.

Monk, R. (2000). Why small businesses fail? CMA Management, 74(6), 12-13.

Mugume, A., & Obwona, M. (2001). Credit Accessibility, and investment decisions in Uganda’s manufacturing sector: An empirical investigation (No. 27). Economic Policy Research Centre.

Obiwuru, T. C., Oluwalaiye, O. B., & Okwu, A. T. (2011). External and internal environments of businesses in Nigeria: An appraisal. International Bulletin of Business Administration, 12, 15-23.

Oforegbunam, E. T., & Okorafor, G. T. (2010). Effects of human capital development on the performance of small & medium scaled enterprises in the Southeastern Region of Nigeria. Journal of Sustainable Development in Africa, 12(8), 49-58.

Ogunrinola, I. O., & Alege, P. O. (2007). Micro-Credit and micro-enterprise development: An analysis of some rural-based enterprises in nigeria. Nigeria Journal of Economics and Social Studies, 49(1), 95-113.

Olusesan, O., & Abioye, O. (2016): The state of Nigeria economy. The Punch Newspaper.

Reinikka, R., & Svensson, J. (2001). Confronting competition: Investment, Profit and Risk. In R. Reinikka & P. Collier (Eds.), Uganda’s recovery: The role of farms, firms, and government. Washington, D.C: The International Bank for Reconstruction and Development / The World Bank.

Sauser, W. I. (2005). Starting your own business? Prepare for success. SAM Management in Practice, 3(1), 1-4.

Sengendo, H., Oyana, T., Nakileza, B., & Musali, P. (2001). The informal sector in employment creation in Kampala. In P. O. Alila & P.O. Pedersen (Eds.), Negotiating social space: East African micro-enterprises. Asmara: Africa World Press.

Simon, W., & Peter F., (2004). Review of DFID activities in the enabling environment – final report. Retrieved from http://www.businessenvironment.org/dyn/be/docs/89/DFID%20Review%20of%20Activities%20in%20the%20EE%202004.pdf

World Bank. (2008). Doing business report. Washington, D. C: The International Bank for Reconstruction and Development / The World Bank.

Downloads

Published

2017-11-30
Abstract 512  .
PDF downloaded 209  .